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Donald Trump and the National Debt

Imagine that your family was so deep in debt that your
credit-card bills exceed your entire paycheck. Every week you spend
more than you take in, with no respite in sight. And you still
haven’t figured out how you are going to fulfill your promise to
send your kids to college. But in today’s mail comes one of those
credit-card offers with a low introductory rate. Sounds like the
perfect time to borrow some more and take that Caribbean vacation
you’ve been dreaming of, right?

Paul Krugman thinks so — and, unfortunately, so does
Donald Trump.

No sooner had Krugman published yet another column arguing that
“Right now there is an overwhelming case for more government
borrowing” than Donald Trump agreed, telling CNBC, “This is the
time to borrow.”

Trump, of course, has had his struggles with the national debt
before. It was just a couple of months ago that he was arguing that
our $19.4 trillion debt wasn’t a problem — “You never have to
default because you print the money.” Before that, he was
suggesting that borrowing more was fine, since “if the economy
crashed, you could make a deal” to pay bondholders less than full
value on the debt owed to them.

Donald Trump seems to
believe that handling the national debt is no different from taking
out a mortgage on one of his casinos: borrow, invest, and, if you
lose money, walk away.

Now Trump has gone full Krugman, calling for massive new
borrowing “while interest rates are low,” in order to finance new
spending on infrastructure and other government programs.

There are more than a few problems with this “borrow and spend”
approach to government finance. First, our national debt already
exceeds 105 percent of GDP. We owe more than the value of all the
goods and services produced in this country over the course of a
year. That is not only hugely unfair to our children and
grandchildren; it is slowing economic growth today. Adding more
debt, even at low interest rates, is not going to make that problem
go away.

Second, even with low interest rates, a lot of money is being
wasted on interest payments. This year, the federal government will
pay more than $250 billion in interest on the debt. That is money
that buys nothing, accomplishes nothing. Every trillion that Trump
would add in new debt would mean a commensurate increase in
interest payments.

Moreover, while interest rates are low now, there is no reason
to believe that they will stay this way, especially if our total
debt explodes and a President Trump threatens default, undermining
the faith of our creditors. If interest rates are one percentage
point higher than CBO projections, that could cost an additional
$1.6 trillion through 2026. Assuming he doesn’t pay off the debt
before then — a pretty safe bet — Trump’s new borrowing
will eventually come due, and presumably be rolled over into new
debt at potentially higher interest rates.

Trump — and Krugman — justify this cost by assuming
that government spending on infrastructure and other projects will
stimulate the economy, increasing growth and generating more in
revenue than we have to pay in interest. But we’ve seen how
inefficient government stimulus spending really is.

Consider the American Recovery and Reinvestment Act (ARRA),
President Obama’s $825 billion stimulus bill passed in February
2009 to combat the recession. The CBO estimated that each permanent
job created would cost taxpayers as much as $755,000. Despite five
separate stimulus bills under Bush and Obama, we are still in one
of the slowest economic recoveries on record.

Maybe under President Trump government will miraculously become
better at picking winners than it has been over the previous 240
years of our Republic. Or maybe not.

Maybe under President Trump government will miraculously become
better at picking winners than it has been over the previous 240
years of our Republic. Or maybe not.

That’s not to say that Hillary Clinton would be any better. She
would spend as much or even more than Trump. If she didn’t increase
the debt as much, it would only be because she proposes more than
$1 trillion in new taxes. That would be a disaster all its own.

Donald Trump seems to believe that handling the national debt is
no different from taking out a mortgage on one of his casinos:
borrow, invest, and, if you lose money, walk away.

Unfortunately, in this case, it would be American workers,
taxpayers, and their children who would be left holding the
bag.